.png)
Election seasons often come with heightened uncertainty. The possibility of policy changes, leadership shifts, and economic disruptions can make investors anxious, leading some to contemplate pulling their money out of the market. However, history tells us a different story: staying invested through election volatility is often the best strategy for long-term financial success. At Finley Davis Financial, our financial advisors are here to help you navigate these uncertain times, ensuring your private wealth management strategy remains aligned with your long-term objectives. Discussing your goals and refining your financial planning with our team can help you stay on track—no matter the election outcome.
Market volatility during election seasons is nothing new. Leading up to an election, financial markets often react to uncertainty as investors try to predict the impact of different candidates' potential policies. However, these short-term reactions are typically just that—short term. Over the long run, the stock market has shown resilience regardless of political outcomes.
David Wessel, Director of the Hutchins Center on Fiscal and Monetary Policy at Brookings, states, "Markets react to uncertainty, but they thrive on fundamentals. No matter who occupies the White House, the primary drivers of the market—corporate earnings, consumer behavior, and global economic trends—continue to dominate in the long run." This highlights the importance of focusing on the bigger picture of your private wealth management rather than being swayed by short-term political fears.
In fact, market data shows that the U.S. stock market has generally trended upward over time, whether under Democratic or Republican administrations. Trying to time the market based on election outcomes often results in missed growth opportunities following initial volatility.
One of the most compelling reasons to stay invested during uncertain times like an election is the risk of missing the market’s best-performing days. According to J.P. Morgan Asset Management, missing just the 10 best days in the market over the past 20 years can dramatically reduce your portfolio’s overall returns.
For instance, if you had stayed fully invested in the S&P 500 between January 2002 and December 2021, you could have seen an annualized return of around 9%. Missing the 10 best days during that same period would cut your return to just 5%. Missing the 20 best days would reduce it even further to around 2%.
The key takeaway for financial planning: Markets often experience their best days shortly after volatility peaks, and investors who exit in fear can miss those vital recovery periods. Staying invested through both the highs and lows is a crucial strategy for long-term private wealth management success.
While election outcomes may influence certain policies and sectors in the short term, it’s essential to remember that market performance is driven by more than just politics. Corporate innovation, technological advancement, and consumer trends are far more powerful drivers of long-term growth than any single election.
Warren Buffett, one of the most successful investors of all time, advises against letting elections or political changes influence investment decisions. He famously said, "The stock market is a device for transferring money from the impatient to the patient." His message is clear: reacting to short-term political changes often leads to costly mistakes in financial planning.
Similarly, John Bogle, founder of Vanguard Group, emphasized the importance of maintaining a long-term perspective: "Time is your friend; impulse is your enemy." For long-term investors, maintaining disciplined financial planning through temporary fluctuations has proven to be the most effective way to achieve compounded returns.
Many investors fear that if the opposing party wins, their investments will suffer. However, historical data shows that both Democratic and Republican administrations have overseen periods of market growth.
While certain sectors may benefit depending on the election result (e.g., renewable energy under Democrats or traditional energy under Republicans), the broader market continues to present opportunities for investors. Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, notes, "No matter who is in power, businesses adapt, markets adjust, and growth continues." Remaining diversified and not making knee-jerk reactions based on political events is essential to successful financial planning.
Another reason to stay invested through election seasons is the power of compounding. Staying invested allows your returns to generate additional returns over time, significantly boosting your portfolio’s value. Pulling money out of the market disrupts this compounding, having long-term negative effects on your private wealth management goals.
David Blanchett, a financial advisor, explains: "Timing the market can be a dangerous game. Missing the market’s recovery after a drop means losing not just the gains from that recovery, but also the potential for those gains to compound in the years that follow."
At Finley Davis Financial, we understand how election seasons can stir up anxiety for investors. Our team of financial advisors are here to help you stay invested, ensuring that your private wealth management strategy remains aligned with your long-term financial planning goals—regardless of the election outcome. We’ll work with you to create a diversified, resilient investment strategy that accounts for potential policy changes while keeping your eyes on the big picture.
Political uncertainty is temporary, but your financial future is built for the long term. Let Finley Davis Financial guide you through this election season and beyond, helping you stay on course without veering off track.
Past performance does not guarantee future results. Diversification does not guarantee a profit or protect against a loss.